Will Your PBM Today Be Your Competitor Tomorrow?

Upheaval in the healthcare industry with mergers and acquisitions involving pharmacy benefit management (PBM) companies appears to be leading to a new normal. In 2015, UnitedHealth Group acquired Catamaran and merged it with its existing PBM company OptumRx. Fast forward and the largest PBM in the United States, Express Scripts, is now poised to be acquired by Cigna. CVS Health, the largest pharmacy chain and second-largest PBM, is poised to acquire Aetna. Anthem plans to launch a new PBM in 2020.

This represents substantial change in the PBM industry, with health insurers not only increasing in size but ushering in a drastically different competitive environment. The PBMs in these deals will continue offering services to other health plans. However, health plans of all sizes – small plans, mid-tier plans, regional plans, integrated delivery networks, even larger plans not involved in these deals – are becoming uneasy about working with a PBM owned by one of their competitors.

And rightly so.

With these deals falling into place, the management of pharmacy benefit services is becoming embedded within large organizations that are inherently positioned to have competing interests with the smaller health plans they seek to serve as clients.

If your health plan has a business relationship with one of these health plan/PBM entities or is considering forming one, you may already be a little wary. Some are wondering if the members these new large entities seek to attract into their health plans are the same members their smaller health plan currently serves. Here are some logical questions:

Will the health plan/PBM prioritize the service and resource needs of members in their own health plan over the needs of members in your plan?

Will they prioritize their need to remain cost-effective over your need to remain cost-effective?

Will any business you award the health plan/PBM provide them with scale and additional revenue that allows them to more effectively attract members into their plan over yours?

The pharmacy supply chain is complex. PBM income may be derived from spread pricing and network fees, administrative and clinical services, drug rebates, discounts, and other fees, or even revenue captured through PBM-owned channels in the supply chain (such as mail order, specialty/infusion, and retail pharmacies). Due to this complexity, transparency is essential for health plans to understand the cost and revenue streams for all parties in the arrangement. Without clear visibility, any health plan/PBM entity could conceal sources of income. The lack of transparency could potentially allow the larger health plan/PBM to prioritize their business goals over the goals of their smaller health plan clients. As a result, it may be difficult for health plans to assess if the health plan/PBM entity is driving value and helping accomplish important objectives for customer experience, clinical quality, and cost management or becoming a competitor.

The large health plan/PBM combined entities would like all smaller health plans to think there is no choice but to work with the larger organization to achieve scale. But there is an obvious internal conflict in this approach since these large plans have revenue and cost-saving imperatives to meet that could at times override the revenue and cost-saving needs of their smaller clients.

DST Pharmacy Solutions believes there is nothing normal about a health plan obtaining services from an organization that has competing interests. You need assurance that your strategy comes first. You need a pharmacy solutions provider who can help you create a future where you are attracting and retaining members, providing high quality and cost-competitive medical and pharmacy services, and successfully competing in a rapidly changing value-centered healthcare environment.

As mergers and acquisitions continue, we invite you to take a new look at DST Pharmacy Solutions. We offer deep operational and regulatory expertise, transparency in the pricing of our services, a broad customer base to help you achieve scale and obtain competitive pricing, and the full suite of technology solutions you need to integrate the medical and pharmacy benefit to help achieve value with optimized health outcomes.

We are one of the largest independent providers of pharmacy services. This independence means your success is our priority.

In this evolving era of pharmacy benefit management, what will your new normal look like?